Off-Shoring

At the same time as U.S.-based corporations have been shiftingAmerica’s production base to low-wage, high-repression nations likeChina and Mexico, America has undergone such a startling polarization that its income distribution pattern resembles that of a “banana republic.” Public polling reflects both deep pessimism about the economy among ordinary Americans (70 percent believe the U.S. is “seriously on the wrong track,” NY Times 4/11) and a conviction among nearly nine out ten of Americans that the U.S. economic growth is being harmed by the off-shoring of jobs.

This latter belief has been hardened by disclosures that since 2000 U.S.-based multinational corporations have been cutting 2.9 million jobs in the U.S. while increasing their foreign employment by 2.4 million (Wall Street Journal4/19/11). Despite these trends, President Obama in 2010 very consciously chose to discard a well-crafted Democratic political strategy drawing exactly upon this opposition to the off-shoring of jobs, designed to preserve a Democratic Congress during the November 2 mid-terms. The result: the unprecedented loss of 63 Democratic House seats and 6 in the Senate.

Disregarding the signals sent by the public in the election, Obama has since even more fully committed himself to “free-trade” agreements that undergird the off-shoring of jobs. However, as the 2012 election draws nearer, the economy’s sluggish performance is likely to make President Obama keenly aware of the extreme dangers of embracing the CEOs and their policies that promote off-shoring jobs.

Obama and his pro-globalization advisors may finally be forced to recognize that off-shoring jobs is extremely unpopular with the electorate, widely perceived as a principal cause of ongoing economic misery, and is thus a barrier to a second term. The most recent economic figures should be setting alarm bells off in the White House: growth of just 1.8 percent in the first quarter, accompanied by mounting layoffs in the public sector, gas prices well over $4 a gallon (thanks in part to Wall Street speculators), and unemployment still just under 9 percent.

Moreover, Republican control of the House means that any stimulus proposal that Obama might contemplate, however unlikely, would be blocked both on ideological grounds and to keep Obama on the hook for economic misery extending into 2012. The “free markets” praised by President Obama have failed to provide the “private-sector job growth” in permanent, middle-class jobs that Obama counted on almost exclusively. Obama’s “Win the Future” export-expansion strategy, which includes passage of free trade agreements, seems doomed to failure.

Battles With Base?

Moreover, the Democratic Party base of labor unionists and progressives—after remaining relatively quiescent during Obama’s first two years—is suddenly showing more signs of independence from Obama and the Democrats. Labor and the left spontaneously exploded into action most notably in Wisconsin with a month-long siege of the State Capitol capped by demonstrations of 100,000 or more people (see April Z), followed by states like Indiana, Michigan, Ohio, and many others, in response to Republican governors’ efforts to revoke public-employee union rights and weaken the voice of democratic forces.

Obama’s drive for the passage of NAFTA-style trade agreements with South Korea (estimated by the Economic Policy Institute to cost about 159,000 U.S.jobs) and Colombia, long notorious for the killing of trade union activists by paramilitary forces, are likely to create two flash-points. AFL-CIO President Richard Trumka declared, “The Colombian trade bill, for instance, it’s outrageous. Fifty-one labor leaders were assassinated last year. They either lacked the will or they lacked the ability to protect trade unions.”

The battles in Congress over trade measures are likely to mobilize opposition from labor and the left, with populist right-wing groups jumping in as well, as they did in 1993 against NAFTA. Obama thus risks open conflict with labor and infuriating much of his electoral base at a time when much of labor is already disillusioned by his unwillingness to stand up to Wall Street.

But so far, Obama continues to embrace the corporate elite and their brand of economics—apart from the most extreme budget-cutting. Within a week of severe Democratic losses in manufacturing states especially vital to his re-election prospects in 2012—from Pennsylvania to Wisconsin—Obama appeared preoccupied with winning back the approval of corporate CEOs. As the NY Times (11/07/10) reported with unusual bluntness: “Still, Mr. Obama seemed mostly to be aiming his message at American business leaders. Many executives during the recent political campaign accused the White House of being anti-business and poured money into the coffers of Republican candidates and groups that aimed to defeat the Democrats….

“Mr. Obama met privately with American chief executives, among them Jeffrey R. Immelt of General Electric, who has been critical of the White House in the past. ‘It’s unprecedented,’ Mr. Immelt said in an interview, praising Mr. Obama for talking up trade, a politically risky move for a Democrat.” To promote the growth of U.S. jobs, Obama has proclaimed the goal of doubling exports from the U.S. within the next five years with his “Win the Future” program.

Along with being premised on new NAFTA-style free trade agreements and no curbs on off-shoring jobs, the export program seems doomed to failure. First, much of America’s productive base has been hollowed out by corporate investment decisions and would require Corporate America to radically change its fundamental strategy. U.S. firms have accelerated the trend of serving foreign markets by locating off-shore rather than exporting from U.S. plants. This trend is so entrenched that major manufacturers like GE demand that their suppliers also relocate to be near their plants in Mexico, as economist William K. Tabb noted in The Amoral Elephant. More than two-thirds of what U.S. corporations sell overseas now actually originates from their plants located abroad.

Finally, “It will take time for any growth of exports to add jobs in America,” pointed out economist Jeff Faux in The Global Class War. “Thirty years of a shrinking industrial base will not be reversed quickly.” Certainly, it will not be revived in time to provide a substantial recovery of manufacturing in time for the 2012 elections.

Still, Obama is plunging ahead with an economic strategy that aligns him closely in the public view with CEOs like GE’s Immelt, who may acquire the same kind of notoriety as Wall Street’s bonus-grabbing bankers. Obama named Immelt as chair of the President’s Council on Jobs and Competitiveness, stating, “He understands what it takes forAmerica to compete in the global economy.” But economist Paul Krugman observed, “The interests of nominally ‘American’ corporations and the interests of the nation, which were never the same, are now less aligned than ever before. Take the case of General Electric, whose chief executive, Jeffrey Immelt, has just been appointed to head the advisory board…. But with fewer than half its workers based in the United States and less than half its revenues coming from U.S. operations, GE’s fortunes have very little to do with U.S. prosperity.” Immelt presided over the closure of at least 18 plants that once employed some 10,000 U.S. workers within just a 6-month period in 2009-10, according to Chris Townsend, political director of the United Electrical workers union.

Moreover, under Immelt, GE’s tax department, staffed by 975 accountants and tax attorneys, managed to pay no federal income taxes for 2010 despite $14.2 billion in profits. GE, in fact, succeeded in accumulating $3.2 billion in tax credits. A NY Times article on GE observed, “While G.E.’s declining tax rates have bolstered profits and helped the company continue paying dividends to shareholders during the economic downturn, some tax experts question what taxpayers are getting in return. Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment. In that time, GE’s accumulated offshore profits have risen to $92 billion from $15 billion.”

Perhaps no corporation more than GE—which the Times called America’s largest—embodies the breakdown of the post-war “social contract” where corporations traded union recognition, high wages, and an enlarged domestic market for labor enforcing workplace discipline and holding back from questioning investment decisions.

The breakdown of the “social contract” is evident in the radical shift in General Electric’s guiding philosophy. As quoted in Steven Greenhouse’s The Big Squeeze, in 1962, GE’s employee benefits manager wrote, “Maximizing employer security is a prime company goal.” The employee who can plan his economic future with reasonable certainty is an employer’s most productive asset. Compare that quaint attitude with the ruthless credo of Jack Welch, GE’s CEO from 1981 to 2001, who showed his disregard for employee loyalty when he declared, “Ideally you’d have every plant you own on a barge.” By that, he meant a readiness to seek out at a moment’s notice the lowest possible wages and most pliable governments (weak regulations, low taxes, hostile to unions, etc.) anywhere on the globe. Immelt, in a more civilized fashion, has embodied the same strategy. Now the norm across Corporate America, it has played a crucial role in transforming America from its legendary place as a “middle-class society” to a highly-polarized social jungle.

The richest 1 percent now rake in nearly a quarter of all income, with their share rising 228 percent from 1979 to 2005. This privileged 1 percent holds 40 percent of all wealth, according to Nobel laureate economist Joseph Stiglitz. Those in the top 10 percent bracket command more than 90 percent of the nation’s net worth. The top 100 CEOs earn 1,723 times as much as their workers (Les Leopold, The Looting of America). Wall Street handed out an estimated $144 billion in bonuses for 2010. Corporate profits for 2010 soared to near-record levels. U.S. firms sit on $2 trillion in domestic savings, with another $1 trillion stashed offshore.

Meanwhile, real wages have been dropping for workers since 1979, with U.S.firms now involved in the biggest wage-cutting spree since the Great Depression. Home foreclosures are occurring at a daily pace 10 times faster than during the Depression, according to Nomi Prins, author of It Takes a Pillage. The United States may well have a more unequal distribution of wealth than traditional “banana republics” like Nicaragua, Venezuela and Guyana, as Timothy Noah of Slate noted in a series on inequality.

Profound Shift Vs. Free Trade

While U.S. elites continue to embrace corporate globalization and off-shoring, a tectonic shift has been taking place about “free trade” among the public, with those who see themselves shut out of the benefits of “free trade”—the majority of American citizens—now increasingly forming a rival consensus of their own: that corporate globalization benefits and empowers only major corporations at the expense of workers, environment, and democracy across the globe.

A WSJ/“NBC News” poll reported on October 2, 2010 showed “83 percent of blue-collar workers agreed that outsourcing of manufacturing to foreign countries with lower wages was a reason the U.S. economy was struggling and more people weren’t being hired; no other factor was so often cited for current economic ills.”

Those results were closely paralleled by a June 2010 poll for the Alliance for American Manufacturing, which showed that the loss of too many manufacturing jobs is the top concern among independents and working-class voters. Most surprisingly, the AAM poll revealed that 74 percent of self-described Tea Party supporters would support a “national manufacturing strategy to make sure that economic, tax, labor, and trade policies in this country work together to help support manufacturing in the United States.”

Public opinion shaping the 2008 elections also displayed the same concern over the flight of jobs to low-wage nations. Similarly,Fortune (1/23/08) reported polling results in 2008 where, “The explanation for the current economic slowdown most frequently cited by respondents: ‘U.S.companies sending jobs overseas where labor is cheaper’.” In the 2006 elections, both CNN and New York Times polls found that the leading issue was economic anxiety and job security, ranking ahead of the Iraq War, educational, and partisan lines about the destructive effects of “free trade” agreements and the off-shoring of jobs that such FTAs promote. Remarkably, 90 percent of Republicans—compared with 84 percent of Democrats—expressed worry in the WSJ/NBC poll about the economic effects of off-shoring. Similarly, the level of concern among blue-collar workers was lower than the general level of 86 percent and substantially below that expressed by professionals and managerial employees, at 95 percent, probably because blue-collar workers have long been subject to the threat of off-shoring. “The important change is that very well-educated and upper-income people compared to 5 to 10 years ago have shifted their opinion and are now expressing significant concern about the notion of…free trade,” said Bill McInturff, a Republican pollster. “Among those earning $75,000 or more, 50 percent now say free-trade pacts have hurt the U.S., up from 24 percent who said the same in 1999.” No doubt the fast-growing phenomenon of off-shoring professional jobs helps to explain this shift. Princeton economist Alan Blinder has calculated that some 37 to 42 million highly-technical U.S. jobs—from computer programming to medical transcription to accounting—are “highly off-shorable” to low-wage sites like China, India, and the nations of Eastern Europe (Wall Street Journal, 3/28/07). When it comes to whose jobs are vulnerable to off-shoring, “The most important divide is not, as commonly argued, between jobs that require a lot of education and those that don’t,” the Wall Street Journalemphasized.

Obama Transformed

Throughout the 2008 primary season, both Barack Obama and rival candidate Hillary Clinton expressed outrage against the flight of jobs off-shore, in order to keep up with Democratic voters infuriated by corporations abandoning U.S.workers and communities. For example, on a frigid Wisconsin day in February 2008, candidate Obama slashed away at “free trade” deals that have cost thousands of Wisconsin jobs. He bemoaned the overseas flight of U.S. jobs and connected viscerally with thousands of mostly blue-collar workers at a rally at an imperiled General Motors plant in Janesville, Wisconsin that would ultimately close 10 months later. Obama denounced “decades of trade deals like NAFTA and China [that] have been signed with plenty of protections for corporations and their profits, but none for our environment or our workers who’ve seen factories shut their doors and millions of jobs disappear; workers whose right to organize and unionize has been under assault for the last eight years.”

But since becoming president, Obama has almost entirely jettisoned his critique of government and corporate policy on jobs and trade. Obama has surrounded himself with advisors like Treasury Secretary Timothy Geithner, former Goldman Sachs executive Lawrence Summers, and Rahm Emanuel (a key player in Bill Clinton’s 1993 drive for NAFTA passage). These advisors hold “free trade” to be an unquestioned article of faith. In 2004, some of the same circle of Wall Street figures—like Robert Rubin and Roger Altman—persuaded Democratic nominee John Kerry to entirely drop his potent rhetoric about “Benedict Arnold CEOs” responsible for the export of jobs.

Carl Rosen, the Western District president of the United Electrical, Radio, and Machine workers, said, with barely-suppressed exasperation, that Obama’s corps of Wall Street-based advisors has one driving loyalty: to a system that maximizes the power of corporations to extract profit. “Obama’s economic advisors’ loyalty doesn’t lie with workers or even getting Obama reelected but with Wall Street,” Rosen concluded.

President Obama’s unwillingness to stress the off-shoring issue surely contributed heavily to the Democrats’ electoral disaster in November 2010. Obama was unwilling to depart from his pro-“free trade” script and pick up the cudgel against corporate off-shoring of U.S. jobs—even in strong union towns like Racine, Wisconsin.

The 2010 election was dominated by the Republicans’ incessantly repeated narrative that ongoing economic troubles were the responsibility of the Democrats’ “big-government” policies. Some Republicans even wove a rightist version of the off-shoring issue into their message. Obama countered with the technically correct but much less compelling argument that the unemployment situation would have been even worse without his economic stimulus, auto bail-out efforts, and continuation of the TARP program begun under George W. Bush.

Progressive pollster and author Ruy Teixeira of the Center for America’s Progress noted that “The most significant shift against the Democrats [in 2010] occurred among the white working class. Congressional Democrats lost this group by 10 points in both 2006 and 2008. Yet that deficit ballooned to 29 points in 2010.”

Professor Jack Metzgar of the Center for Working Class Studies has observed the stunning nature of this electoral shift in 2010 evident in Midwestern factory towns toward candidates who had consistently opposed every palliative measure Obama had proposed to ease the Great Recession’s effects. That’s a huge move toward Republicans who were against saving the American auto industry and who voted against infrastructure investments and jobs, (very) partial bailouts of state governments, extensions of unemployment insurance, and health care reform and tax policies that benefit working-class whites.

Obama’s failure to put forth a coherent economic narrative produced muddled decisions about voting among working people. For example, one retired nurse in Ohio, a former union activist and a supporter of anti-globalization populist John Edwards in the 2008 primary, exemplified the mixed feelings and convoluted thinking that affected voting. “I sort of want to vote all Republican to teach the Democrats a lesson,” the woman told labor journalist David Moberg (In These Times, 10/20/10). “Obama was going to do all this for the middle class. But I’m not seeing it. Even on housing—where’s the help? Could the Republicans do a better job? No. Maybe both parties should look more at how to create new jobs and not outsource so much. It’s like all our jobs are shipped to other places so companies can make more money.”

In general, turnout of Democratic-leaning constituencies—workers, people of color, and young people—was weak in the middle of the nation, according to Rep. Alan Grayson (D-FL), who was among the Democratic casualties. Grayson contended on “Democracy Now!” that the Obama administration had followed a “strategy of appeasement” that left the Democratic base disoriented and demoralized.

Lori Wallach, director of Public Citizen’s Global Trade Watch, makes a convincing case (CommonDreams.org, 11/3/10) that Obama cannot hope to be re-elected without taking convincing action to stem the tide of off-shoring jobs and promoting an alternative “fair trade” model that protects and restores U.S. jobs and workers’ rights and the environment around the world.

Without winning back voters in the industrial Midwest who were crucial to his victory in 2008, it is hard to see any path to an Obama reelection. According to Wallach: “In 2008, Obama only won the election because he won the critical states of Ohio, Pennsylvania, Michigan, and Wisconsin by differentiating himself from McCain on trade. It is pretty obvious with Democrats and GOP nationwide running against the trade status quo and its job off-shoring damage, that if Obama flip flops now in favor of more job-killing NAFTA agreements, he will lose those states and end up a one term president."